This Blog On Hard Money Lending Rates In Chicago On Investment Properties Was UPDATED On November 25th, 2018
Hard money lending rates are higher than traditional commercial lending rates due to the risk factors taken on by hard money lenders.
- Hard money loans are real estate loans based on the equity on the property
- Private hard money lenders will originate and fund hard money loans
- Hard money loans are not based on the borrower’s credit or income profile but rather on the property
In this article, we will cover and discuss the lending rates of hard money loans.
Factors Important To Hard Money Lenders
Hard money lenders are mainly concerned about two main key factors:
- The amount of down payment the hard money borrower will put down so the Loan To Value is extremely important
- Hard money lenders prefer funding loans where the loan to value is lower and down payment higher
- 50% or more down payment shows the strength of the borrower and less risk on the lender
- Minimum down payment requirement is 20%
- No credit scores or income is required
Hard money lenders will be concerned about how will the borrower make good on their minimum monthly payment due and the borrower’s exit strategy in paying the balance.
Hard Money Lenders
Hard money lenders normally like to fund the deals within a few weeks from the borrower signing the letter of intent to proceed.
- Most sophisticated hard money lenders will fund a hard money finance deal in less than 30 days
- Hard money lending rates are vary depending on the loan to value and credit scores of the borrower
- The higher the credit risk the borrower is, the higher the upfront points
- Hard money lending rates will be
- Smaller loan sizes require the same amount of work as larger size loans so mortgage interest rates can be higher
- Hard Money Lending Rates can run you into the double digits and it will cost you 4 points or more in fees if the borrower is putting a smaller down payment
- Hard Money Loans are not for everyone
- Hard money loans are for real estate investors, property flippers, property rehab professionals
- These loans benefit investors with the mentality that it takes money to make money
- Hard money lenders are a Godsend for them
- Hard Money Loans can be a win-win situation for certain types of borrowers
We will use case scenarios examples to see whether hard money loans are the right mortgage loan program for you.
Benefits Of Hard Money Loans
Here are some benefits to Hard Money Loans:
- One of the main advantages of hard money loans is that most hard money lenders do offer fast closings
- Lenders are very hungry to fund loans due to the hard money lending rates and fees being so lucrative
- Most Hard Money Loan situations are for those seeking financing opportunities that require fast closings
- These hard money borrowers are typically borrowers with credit and financial problems who have equity in their properties but need a quick fast solution in getting cash
- Borrowers prefer to pay higher rates without the countless documentations required by traditional commercial mortgage lenders
Hard Money Loans are for both individual borrowers for personal reasons and business professionals who are in a cash crunch for unexpected business expenses for their businesses.
Types Of Financing And Hard Money Lending Rates
Hard money loans are generally real estate backed loans.
- Real estate is used for collateral in most cases or some other type of liquid assets where a large equity position is required in order for the hard money lender to fund the transaction
- Hard money lending is normally for short term loans
- But during that short term financing term, the hard money lending rates will be very high
- So are the fees
Real Estate Properties Ideal For Hard Money Funding
Below are the types of projects that are funded via hard money lending programs by hard money and private money lenders:
- Owner and Non-Owner Occupant Single Family Residential Properties that are between one to four units.
- Real Estate Properties that are cross-collateralized
- Multi-Family properties
- Home Purchases And Cash-Out Refinances
- Fix Flip Rehab Property Loans for Rehabbers and Real Estate Investors
- Short Sale Properties needing to close quickly
- Investment Properties Mortgages
- Properties That Are In Foreclosure Or About To Go Into Foreclosure
- Blanket Lines Of Credit
Terms Of Hard Money Lending Rates
Hard Money Loans is normally for short term financing and most hard money borrowers will not hold a hard money loan for more than two years.
- Some hard money borrowers will use hard money loans to purchase a fixer-upper property that is well under market value
- The borrower will then either resell it the way it is or do some repairs and window dress it and resell it for a handsome profit
- Profit is lucrative so the hard money lending rates and the upfront points and fees are immaterial for the investor
Here are the basic terms for most hard money lending programs offered in today’s market:
- 6‐12 month terms –
- Some situations terms can be up to a maximum term of 60 months or less
- Hard money lenders will often offer interest-only payments with the principal payment due when the hard money loan matures or when it is paid off
- There are no prepayment penalties allowed in most states
- Hard Money Lending Rates are generally higher than traditional commercial financing mortgage rates
- Collateral is the most important when it comes to hard money financing
- Credit Scores and borrowers income has very little to do with hard money lenders
- Hard money lenders will charge fees and points upfront besides the high hard money lending rates
- The upfront fees and costs of the origination of hard money loans are what the investors of the hard money funding and commercial hard money loan brokers get paid with
- Strong collateral and low loan to value are the key factors on the strength of the hard money borrower.
Hard Money Lending Rates On Fix And Flip Loans
Gustan Cho Associates has fix and flip loan programs which include the rehab financing.
Here is how our fix and flip rehab loans work:
- 15% down payment on property purchase
- 90% of the construction costs will be financed
- After value needs to be at 75% Loan To Value
- 9 months interest-only term
- The term can be extended
- No income verification and tax returns required
- Available nationwide
If you are a property flipper, in need of fast cash on your property that has equity, need to purchase real estate at an auction, or are in need of quick liquidity from the properties that you own, hard money may be a great option for you. If you are interested in hard money financing, please contact Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays to take your hard money loan inquiry and will get you a quick solution in less than 24 hours.